Lawsuit Accuses Texas of Taxing Small Tobacco Companies to Help Big Tobacco

Small tobacco companies are suing the state of Texas over a new law that they say unfairly taxes them as a favor to Big Tobacco.

On June 14, Governor Rick Perry (R) signed Texas House Bill 3536, which levies a tax of 2.75 cents for each cigarette sold or distributed in Texas by small cigarette manufacturers. The Texas Small Tobacco Coalition responded with a lawsuit claiming the law is unconstitutional because it does not mandate the same tax on large tobacco companies.

When he signed the bill, Perry said the law “was designed...to protect the market share of the Big Tobacco manufacturers.”

The plaintiffs agree, saying Big Tobacco’s lobbyists pushed lawmakers into adopting the legislation. The case has its roots in the settlement of a 1998 antitrust lawsuit in which the Big Four tobacco manufacturers—Phillip Morris, R.J. Reynolds, Brown & Williamson, and Lorillard—were accused, among other transgressions, of secretly breeding high nicotine tobacco, marketing to adolescent girls by preying on their insecurities, and promoting cigarettes as an alternative to dieting.

The small tobacco companies claim that when Big Tobacco negotiated the settlement, they “insisted on unusual provisions designed to protect their standing in the industry.”

The Big Four currently pay more than half a billion dollars a year to Texas as part of the settlement, which did not include the smaller companies.

“They have for years lobbied for small cigarette manufacturers, which were not included in the $17 billion settlement, to face a similar financial penalty,” Emily Ramshaw and Jay Root wrote at The Texas Tribune.